Tech companies are in the business of transformation. They have the ability to transform something we do every day (like how we communicate) and transform entire businesses (back to the business-model drawing board for some folks). This is why it was fascinating to hear about the major impact that digital technology has had on the professional sports industry during a recent ACG (Association for Corporate Growth) meeting in San Francisco.
How technology has intersected with sports was the main topic of discussion by speaker Roger Noll, professor of economics, emeritus at Stanford University, who is an expert in the study of sports marketing and the economic expansion that has transformed professional sports in the past 20 years.
Here are a few statistics he shared that help illustrate how dramatic this industry has changed:
- The average professional hockey team from 1965-1975 was family owned and had less revenue than a typical Chevron station.
- The Yankees and the Dodgers were sold around 1970 for $12 million each, the first teams to be valued at over $10 million.
- Bill Russell was the highest paid NBA player in the late ’60s. He made $12,000 a year.
The introduction of digital technology and the enormous expansion of the TV viewing audience have fundamentally transformed the reach and capabilities of pro sports teams, enabling them to enter more households and sell more merchandise. And increase their fan base at every turn. The downside: supply and demand. You still have the situation of a fixed number of teams and 10x the number of TV stations that want to broadcast games. Also, more cities want to host professional teams than there are in existence (something 49ers fans in San Francisco know all too well).
Sports team owners have taken smart advantage of demand. They realized they don’t need to build larger stadiums for additional seating—they can keep their stadiums around the 45,000-seat average—and use a lot of their space for concessions, shopping and arcades. Merchandising and broadcast revenue is where the big money is, and now teams are worth between $1 billion to $2 billion!
Of course, other factors have led to the dramatic increase in revenue, salaries and valuations, such as collective bargaining with the players and shared revenue contracts, but the key enabler was the growth of digital technology and digital media. Advances in technology have expanded how much time we all spent consuming and thinking about sports—and how many of our dollars we give toward it. People today spend much more of their free time watching sports, reading about them or shopping for merchandise.
One of the most challenging and thought-provoking books I’ve ever read sprang to mind when I was at the ACG meeting. Published in 1967, The Medium Is the Massage, by Marshall McLuhan, was packed with ideas that were decades ahead of their time. With his concept of an electronic Global Village and the mass influence of electronic communication technologies, McLuhan predicted the Web and social media over 30 years before they came into existence.
Now when we’re on the move, we can make sure we don’t miss a minute by teeing up the DVR through our smartphone. We can get the sense of camaraderie even if we’re watching alone in our living rooms by sending out real-time reactions on social media. On top of this, we’re living in a time where we can skip the stadium but feel like we’re still at the game through a virtual reality headset.
The transformative changes and the power and influence that technology has had on professional sports remind me of this quote in McLuhan’s book: “We become what we behold. We shape our tools and thereafter our tools shape us.”
What tool is going to shape your business in the year to come? What disruptive innovations, products and trends are wending their way into how your products or services are perceived, consumed and monetized? Some of the leading candidates—the internet of things, artificial intelligence, driverless vehicles and nanotechnology, to name a few—are poised for some transformative effects (not to mention they’ll be multitrillion-dollar markets within 10-20 years). How will these changes affect your lifestyle and your business?
Stay curious, my friends.
Stan Fels is a director at RoseRyan, who joined the finance and accounting consulting firm in 2006. In addition to helping the finance dream team keep their skills sharp and stay true to RoseRyan’s proven processes, he matches gurus to clients in the high tech and life sciences sectors.
